New South Africa mining code triggers stocks slump

AFP

Despite its continued importance to the South African economy, mining has in the last decade experienced a marked declined fire, killing 34 miners and wounded dozens more. By MUJAHID SAFODIEN (AFP/File)

Johannesburg (AFP) - South Africa adopted a new mining code on Thursday requiring companies to have majority black investors to qualify for new prospecting licences, causing the major miners' stock to tumble.

The controversial Mining Charter forces firms seeking mining prospecting rights to have a minimum of 50 percent plus one share owned by black investors while requiring firms with existing mines to have 30 percent black ownership -- up from 26 percent.

Companies will have one year to achieve the new 30 percent target.

By midday, South African-focussed miners Sibanye Gold shares had shed six percent, platinum giant Anglo American had lost five percent while Kumba Iron Ore also dipped five percent.

The country's mining minister Mosebenzi Zwane said the long-awaited regulations were a "key instrument for radical change, designed to address many of the inequalities in the mining and minerals sector prior to 2002".

Ministers have for years been critical of the slow pace of change in the sector which has been a cornerstone of South Africa's economy.

Despite its continued importance to the economy, mining has in the last decade experienced a marked decline, as lengthy sometimes violent labour disputes, low commodity prices and underinvestment have all taken a toll.

Zwane acknowledged the important role of mining over the last 100 years, but said the sector, which is often accused of exploitation, had not done enough to increase the participation of South Africa's black majority.

The charter, which includes a raft of reforms including mandatory workers' housing and quotas for blacks on boards, also requires that the 30 percent black-held equity be distributed between employees, mine communities and entrepreneurs.

Zwane said previous regulations had failed to have an impact.

But the mining industry's trade body, the Chamber of Mines, has rejected the charter, calling it a "seriously flawed" policy adopted without proper consultation.

"The lack of meaningful engagement with the industry, and collective engagement with all stakeholders, has been most disappointing," said Chamber of Mines chief Mxolisi Mgojo.

"Transformation should be implemented in a way that is sustainable, with practical and rational targets. Transformation and competitiveness goes hand in hand."